Myanmar is planning to establish a Credit Guarantee Corporation (CGC) with a US$60 million loan from the Asian Development Bank (ADB).
Interest Rate will be 1pc per year during a grace period of eight years and 1.5pc per year during the repayment period over the next 24 years.
U Maung Maung Win, the Deputy Minister for the Ministry of Planning, Finance, and Industry, said in Parliament on May 21 that small and medium enterprises (SMEs) in Myanmar lack a credit guarantee system which limits the amount of unsecured loans the banks are able to extend. Establishing the CGC will help solve the problem of SMEs having insufficient collateral and documentation, which prevents them from getting a loan from the banks.
Yet, bank lending for businesses in Myanmar comprise just 37 pc of GDP, which is low compared to other countries in the region.
The CGC will be formed in three stages. Under the first and second stages, to be complete before the end of the year, a wholly-owned CGC will be established by the government utilizing the ADB loan. The third stage will see the CGC sign agreements with financial institutions to establish the necessary financial systems required. This will be implemented between 2021 and 2025.
During 2013–2019, ADB extended funds totaling $2.4 billion to support development in Myanmar.